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she testified that she would have sought veterinary care if D.J. 

became sick. Van Kleek alone exercised control over D.J.’s 

position relative to the outside world. That she did not breach 

a duty of care by, for example, carelessly leaving the gate open 

or bringing D.J. into “the public domain where third parties 

reside,”35 does not mean that she owed no duty.

CONCLUSION

Van Kleek was an insured under the policy because she 

was “legally responsible” for the Chapmans’ dog. As an 

insured, the unambiguous terms of the policy exclude coverage of her injury. Accordingly, Farmers is entitled to summary judgment.

Affir

35 Brief for appellant at 17.

Delores Shaffer, as Guardian and nex

Brian Shaffer, an incapacitated person, appel

Nebraska Department of Health 

Services and Vivianne M. Chaumont, di

Division of Medicaid and Long-Te

appellees, and Coventry Health

of Nebraska, Inc., appell

___ N.W.2d ___

Filed December 19, 2014. No. S-14-165.

1. Administrative Law: Final Orders: Appeal and Error. A judgment or 

final order rendered by a district court in a judicial review pursuant to the 

Administrative Procedure Act may be reversed, vacated, or modified by an appellate court for errors appearing on the record.

2. Administrative Law: Judgments: Appeal and Error. When reviewing an 

order of a district court under the Administrative Procedure Act for errors 

appearing on the record, the inquiry is whether the decision conforms to the 

law, is supported by competent evidence, and is not arbitrary, capricious, 

or unreasonable.

3. Judgments: Appeal and Error. Whether a decision conforms to law is by definition a question of law, in connection with which an appellate court reaches a 

conclusion independent of that reached by the lower court.
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4. Administrative Law: Statutes: Appeal and Error. The meaning and interpretation of statutes and regulations are questions of law for which an appellate court 

has an obligation to reach an independent conclusion irrespective of the decision 

made by the court below.

5. Judgments: Jurisdiction: Appeal and Error. When a jurisdictional question 

does not involve a factual dispute, its determination is a matter of law, which 

requires an appellate court to reach a conclusion independent of the decisions 

made by the lower court.

6. Actions: Parties: Standing. To have standing, a litigant must have a legal or 

equitable right, title, or interest in the subject matter of the controversy.

7. Parties: Judgments: Appeal and Error. An appeal is generally available only 

to persons who were parties to the case below, although in a proper case a nonparty may be sufficiently interested in a judgment to permit him or her to take an 

appeal from it.

8. Parties: Jurisdiction: Waiver. The presence of necessary parties to a suit is a 

jurisdictional matter that cannot be waived by the parties; it is the duty of the 

plaintiff to join all persons who have or claim any interest that would be affected 

by the judgment.

9. Administrative Law: Words and Phrases. An administrative agency is a neutral 

factfinding body when it is neither an adversary nor an advocate of a party.

10. Administrative Law: Parties. When an administrative agency acts as the primary civil enforcement agency, it is more than a neutral factfinding body.

11. ____: ____. An administrative agency that is charged with the responsibility of 

protecting the public interest, as distinguished from determining the rights of 

two or more individuals in a dispute before such agency, is more than a neutral 

factfinding body.

Appeal from the District Court for Lancaster County: Pau

D. Merritt, Jr., Judge. Vacated and dismissed

Thomas J. Kenny, Kathryn E. Jones, and Edward M. Fox II, 

of Kutak Rock, L.L.P., for appellant.

Alan E. Peterson and Thomas J. O’Neill for appellee Delores 

Shaffer.

On brief, Douglas J. Peterson, of Keating, O’Gara, Nedved 

& Peter, L.L.O., for appellee Delores Shaffer.

Heavican, C.J., Wright, Connolly, Stephan, M

and Cassel, JJ

Stephan, 

This is an appeal from an order of the district court for 

Lancaster County which reversed a determination by the 
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742 289 NEBRASKA REPORTS

Nebraska Department of Health and Human Services (the 

Department) that Brian Shaffer was ineligible for certain 

Medicaid benefits. The appellant, Coventry Health Care of 

Nebraska, Inc. (Coventry), participated in the administrative proceedings and advocated the determination eventually 

reached by the Department, but it was not named as a party in 

the appeal to the district court. Coventry contends that it was 

a necessary party to the district court appeal and that because 

it was not joined, the district court was without jurisdiction to 

reverse the Department’s determination in its favor. We conclude that Coventry has standing to appeal and was a necessary 

party in the appeal to the district court.

I. BACKGROUND

Shaffer is a 33-year-old man with severe autism and chemical sensitivities. He has many environmental, food, and drug 

allergies. He resides with his mother, Delores Shaffer, who is a 

licensed practical nurse.

Coventry is a managed care organization (MCO) which 

contracts with the Department to provide Medicaid services.1

Coventry receives a capitation payment, which is a fee “paid 

by Medicaid to an MCO on a monthly basis for each client 

enrolled with the physical health or behavioral health plan. The 

fee covers all services required to be provided by the MCO to 

the client, regardless of whether the client receives services or 

not.”2 This type of care program is different from a fee-forservice program in that Coventry receives from the Department 

a set rate for each person enrolled in its program.3 Coventry 

then provides the requested services.4

Until October 2011, Delores was paid to provide 18 hours 

a day of private duty nursing (PDN) care to Shaffer. This payment came from a Medicaid provider other than Coventry. In 

October 2011, Shaffer’s Medicaid coverage was then transferred to Coventry. In April 2012, Delores asked Coventry 

1 See 471 Neb. Admin. Code App. 471-000-122 (2010).

2 482 Neb. Admin. Code, ch. 1, § 002 (2013).

3 Id.

4 482 Neb. Admin. Code, ch. 4, § 001 (2012).
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to approve her to continue to provide PDN to Shaffer for 18 

hours each day. Coventry denied this request after determining the nursing services were not medically necessary. Shaffer 

filed a first-level appeal with Coventry, which was denied. 

Shaffer then filed a second-level appeal with Coventry, which 

was also denied. Shaffer then requested a State fair hearing 

with the Department pursuant to 482 Neb. Admin. Code, ch. 7, 

§ 003 (2010).

The fair hearing was held on January 22, 2013, before a 

hearing officer. Shaffer was represented by legal counsel. 

Teresa Engel, Coventry’s supervisor of the appeals department, 

appeared for Coventry. At the commencement of the hearing, 

the hearing officer asked the “parties” to enter into a stipulation regarding the redaction of certain information from the 

exhibits which were to be offered. Engel and Shaffer’s counsel 

agreed to the stipulation, which was made a part of the record. 

Engel also acknowledged that Coventry had received copies of 

all exhibits “from the State.”

The hearing officer noted it was customary to “have the 

Department or its representative or contractor in this case, 

Coventry, put on [its] testimonial evidence first.” Shaffer’s 

counsel indicated he had no objection to this procedure, and 

both Engel and Shaffer’s counsel declined the hearing officer’s 

invitation to make opening statements. Engel was then sworn 

as Coventry’s first witness. Engel presented narrative testimony explaining Coventry’s reasons for denying the requested 

Medicaid benefits and describing the first- and second-level 

appeal determinations made by Coventry. She was crossexamined by Shaffer’s counsel, after which she stated Coventry 

was resting its case but “may . . . pose additional questions at 

the end.”

Shaffer’s counsel then called both Delores and Shaffer’s 

allergist. Both testified that in their opinion, continuation of 

the PDN care which Delores had been providing to Shaffer 

was medically necessary. The hearing officer permitted both 

Engel and Dr. Debra Esser, Coventry’s vice president of medical affairs, to cross-examine both witnesses. On behalf of 

Coventry, Engel made a relevancy objection during Delores’ 

direct examination, which the hearing officer overruled.
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After Delores and Shaffer’s allergist concluded their testimony, Esser was sworn and testified on behalf of Coventry, 

apparently as a rebuttal witness. Esser, a board-certified family 

practice physician, stated in response to questions posed by 

Engel that the PDN services for Shaffer were not medically 

necessary. She was cross-examined by Shaffer’s counsel.

The hearing officer asked both Engel and Shaffer’s counsel if they wished to offer any additional evidence, and when 

they responded in the negative, the hearing officer announced, 

“[b]oth parties have rested.” Shaffer’s counsel made a closing 

statement, to which Engel responded.

On April 9, 2013, Vivianne M. Chaumont, who was then the 

director of the Division of Medicaid & Long-Term Care of the 

Department, entered an order based upon the record made at 

the State fair hearing. The order noted that Engel and Esser had 

appeared at the fair hearing on behalf of Coventry, that “[t]he 

parties” had entered into a stipulation regarding exhibits, and 

that “[a]ll parties were provided proper notice of the administrative hearing.” After discussing the evidence adduced at the 

fair hearing, the order concluded the PDN services at issue 

were not medically necessary.

Delores, as Shaffer’s guardian and next friend, filed a petition in the district court for Lancaster County seeking judicial 

review of this order pursuant to the Administrative Procedure 

Act (APA).5 The petition named the Department and Chaumont 

in her official capacity as respondents, but did not name 

Coventry. The district court conducted a de novo review of the 

administrative record and reversed the order of the Department, 

finding the PDN services which Delores provided to Shaffer 

were medically necessary, because there was a significant 

probability that Shaffer could develop medical complications 

“virtually immediately” without such services.

The Department did not appeal, but Coventry did. We moved 

the appeal to our docket on our own motion pursuant to our 

5 See Neb. Rev. Stat. §§ 84-901 to 84-920 (Reissue 2014).
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statutory authority to regulate the caseloads of the appellate 

courts of this state.6

II. ASSIGNMENTS OF ERROR

Coventry assigns, consolidated and restated, that the district 

court erred in (1) failing to find Coventry was a necessary 

party to the district court appeal; (2) failing to join Coventry 

as a necessary party, because the Department was statutorily 

precluded from being a party; and (3) finding the PDN services 

were medically necessary.

III. STANDARD OF REVIEW

[1-3] A judgment or final order rendered by a district court 

in a judicial review pursuant to the APA may be reversed, 

vacated, or modified by an appellate court for errors appearing on the record.7

 When reviewing an order of a district court 

under the APA for errors appearing on the record, the inquiry 

is whether the decision conforms to the law, is supported by 

competent evidence, and is not arbitrary, capricious, or unreasonable.8

 Whether a decision conforms to law is by definition a question of law, in connection with which an appellate 

court reaches a conclusion independent of that reached by the 

lower court.9

[4] The meaning and interpretation of statutes and regulations are questions of law for which an appellate court as an 

obligation to reach an independent conclusion irrespective of 

the decision made by the court below.10

[5] When a jurisdictional question does not involve a 

factual dispute, its determination is a matter of law, which 

6 Neb. Rev. Stat. § 24-1106(3) (Reissue 2008).

7 Holmes v. State, 275 Neb. 211, 745 N.W.2d 578 (2008); Stejskal v. 

Department of Admin. Servs., 266 Neb. 346, 665 N.W.2d 576 (2003).

8 Id.

9 Id.

10 Betterman v. Department of Motor Vehicles, 273 Neb. 178, 728 N.W.2d 

570 (2007).
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requires an appellate court to reach a conclusion independent 

of the decisions made by the lower court.11

IV. ANALYSIS

1. Coventry’s Sta

to Appea

[6] A threshold issue in this case is whether Coventry has 

standing to bring this appeal from the order of the district 

court, despite the fact that it did not participate in the district 

court proceedings. The APA provides that an “aggrieved party” 

may seek appellate review of a district court’s order or judgment in an appeal from an administrative agency.12 Because 

the phrase “aggrieved party” is not defined by the APA, we 

have addressed the issue as a matter of standing.13 To have 

standing, a litigant must have a legal or equitable right, title, 

or interest in the subject matter of the controversy.14 The “party 

aggrieved” concept must be given a practical rather than hypertechnical meaning.15

[7] An appeal is generally available only to persons who 

were parties to the case below, although in a proper case a 

nonparty may be sufficiently interested in a judgment to permit him or her to take an appeal from it.16 Here, Coventry 

successfully contested Shaffer’s claim at the fair hearing. 

Coventry contends it has a financial interest in the outcome 

of this litigation and that as an MCO, it was a necessary party 

to the APA appeal under federal Medicaid regulations.17 The 

district court’s order acknowledges that “[Shaffer’s] coverage with [Coventry] became effective on October 1, 2011,” 

11 Id.

12 § 84-918(1).

13 See, In re Application of Metropolitan Util. Dist., 270 Neb. 494, 704 

N.W.2d 237 (2005); Stoneman v. United Neb. Bank, 254 Neb. 477, 577 

N.W.2d 271 (1998). 

14 See In re Application of Metropolitan Util. Dist., supra note 13.

15 Id.

16 Rozmus v. Rozmus, 257 Neb. 142, 595 N.W.2d 893 (1999).

17 See 42 C.F.R. § 438.408(f)(2) (2013).
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and it utilized the definition of “medical necessity” set out in 

Coventry’s “Handbook of Covered Services” in reaching its 

determination. We are satisfied that Coventry has alleged a 

sufficient legal right and interest in the matter in controversy 

to confer standing to appeal from the final order of the district court.

2. Necessary Partie

[8] Generally, the presence of necessary parties to a suit is a 

jurisdictional matter that cannot be waived by the parties; it is 

the duty of the plaintiff to join all persons who have or claim 

any interest that would be affected by the judgment.18 Here, 

Shaffer’s petition for review filed in the district court named 

only the Department and the Medicaid director as respondents. 

Coventry contends there was a defect of parties before the district court for two reasons: (1) the Department was not a proper 

party to the appeal and (2) Coventry was a necessary party that 

was not joined.

Our resolution of both contentions begins with the provision of the APA which requires that in proceedings for judicial 

review of a final decision by an administrative agency in a 

contested case,

[a]ll parties of record shall be made parties to the proceedings for review. If an agency’s only role in a contested case is to act as a neutral factfinding body, the 

agency shall not be a party of record. In all other cases, 

the agency shall be a party of record.19

(a) The Department

[9-11] Coventry contends that the Department was not a 

proper party to the district court appeal because it served 

only as a “neutral factfinding body” in the contested case. 

Recently, in McDougle v. State ex rel. Bruning,

20 we summarized the principles which guide the determination of whether 

an administrative agency acts solely as a neutral factfinding 

18 Pestal v. Malone, 275 Neb. 891, 750 N.W.2d 350 (2008).

19 § 84-917(2)(a)(i).

20 McDougle v. State ex rel. Bruning, ante p. 19, 853 N.W.2d 159 (2014).
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body, or serves a broader role. An administrative agency is a 

neutral factfinding body when it is neither an adversary nor 

an advocate of a party.21 In contrast, when an administrative 

agency acts as the primary civil enforcement agency, it is 

more than a neutral factfinding body.22 Also, an administrative 

agency that is charged with the responsibility of protecting the 

public interest, as distinguished from determining the rights 

of two or more individuals in a dispute before such agency, is 

more than a neutral factfinding body.23

We have not previously addressed the nature of the 

Department’s role in a contested case involving eligibility for 

Medicaid benefits. We have held that in other contexts, the 

Department or its predecessor served in a broader role and was 

therefore a “party of record” in judicial review proceedings 

under the APA. McDougle involved a proceeding to revoke 

the license of a mental health practitioner and alcohol and 

drug counselor. We held the Department’s Division of Public 

Health acted as more than a neutral factfinder, because it was 

the primary civil enforcement agency for credentialing violations pertaining to the health care professions and possessed 

broad statutory powers to protect the public and regulate the 

professions. Similarly, in Beatrice Manor v. Department of 

Health,

24 we held that the Department of Health was a necessary party in proceedings to review its determination, through 

the Nebraska Health Care Certificate of Need Appeal Panel, to 

deny a health care facility permission to add more beds, given 

its responsibility for protecting the public interest as distinguished from determining the rights of two or more individuals in a dispute before the agency.

Applying these principles, we conclude that the Department 

was a party of record in this case. The Department has broad 

regulatory power, oversight of the Medicaid program, and 

21 Id.

22 Id.

23 Id.

24 Beatrice Manor v. Department of Health, 219 Neb. 141, 362 N.W.2d 45 

(1985).
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a stake in the contract with Coventry. It is charged with 

administering the Nebraska Medicaid program.25 The purpose of the program is to provide medical assistance to eligible residents.26 Pursuant to this authority, the Department is 

authorized to “adopt and promulgate rules and regulations.”27

This is comparable to the Division of Public Health in 

McDougle, which also had broad powers to establish rules 

and regulations.28

Additionally, the Department is authorized to provide medical assistance for eligible recipients by utilizing managed 

care contracts.29 The Department is responsible for processing 

and determining the eligibility of each applicant for medical 

assistance.30 It is also responsible for establishing “premiums, 

copayments, and deductibles,” as well as limits on those services.31 Clearly, it is charged with protecting the public interest 

with respect to Medicaid, which it accomplishes in part by contracting with and paying MCO’s such as Coventry. Because of 

the Department’s broad authority and responsibility for administering the Medicaid program in Nebraska, its role at a State 

fair hearing is far more expansive than simply adjudicating 

disputes between parties regarding Medicaid eligibility. Thus, 

in this case, it was a “party of record” within the meaning of 

§ 84-917(2)(a)(i).

(b) Coventry

Whether Coventry was a necessary party to the district 

court appeal is likewise dependent upon whether it was a 

“party of record” at the State fair hearing.32 Coventry contends 

that it was not a “party of record,” but should have been. We 

25 Neb. Rev. Stat. § 68-908(1) (Cum. Supp. 2014).

26 Neb. Rev. Stat. § 68-905 (Reissue 2009).

27 § 68-908(2)(b).

28 McDougle, supra note 20.

29 Neb. Rev. Stat. § 68-910(2) (Reissue 2009).

30 Neb. Rev. Stat. § 68-914(1) (Cum. Supp. 2014).

31 Neb. Rev. Stat. § 68-912(1)(a) (Cum. Supp. 2014).

32 See § 84-917(2)(a)(i).
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conclude that the question of whether Coventry was a “party 

of record” at the State fair hearing and thus a necessary party 

in the district court appeal is a jurisdictional issue which 

does not involve a factual dispute; thus, we must resolve the 

question independently on the basis of the record and applicable law.33

The bill of exceptions from the State fair hearing proceedings does not specifically identify any “parties of record.” 

While this creates some ambiguity on the point, the failure 

of the Department to make this important determination on 

the record in the administrative proceeding does not resolve 

the jurisdictional issue. As we noted in McDougle,

34 there is 

no statutory directive that the phrase “parties of record” for 

purposes of judicial review of an administrative determination 

is limited to those parties named in the underlying administrative proceeding.

This position is consistent with holdings by other state 

courts. In an Oklahoma case, the court found that even though 

two entities were not named and joined as parties in the caption 

of the administrative action, they both appeared, participated, 

and were entitled by law to participate; thus, they were parties 

of record and failure to join them on appeal was a jurisdictional defect.35 Similarly, a Washington court defined a party of 

record as a person “‘to whom the agency action is specifically 

directed,’” or a person “‘named as a party to the agency proceeding or allowed to intervene or participate as a party in the 

agency proceeding.’”36

For two principal reasons, we conclude Coventry was a 

“party of record” at the State fair hearing. First, as an MCO, 

Coventry was required by federal law to be a party to the State 

fair hearing. Because Nebraska has elected to participate in the 

33 See McDougle, supra note 20.

34 Id.

35 Oklahoma Foundation v. Dept. of Central, 180 P.3d 1 (Okla. Civ. App. 

2007).

36 Litowitz v. Growth Management Bd., 93 Wash. App. 66, 69, 966 P.2d 

422, 423 (1998) (emphasis supplied). See Wash. Rev. Code Ann. 

§ 34.05.010(12)(a) and (b) (West Cum. Supp. 2015).
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federal Medicaid program, it must comply with standards and 

requirements imposed by federal statutes and regulations.37 A 

federal Medicaid regulation governing resolution of grievances 

and appeals specifically provides: “The parties to the State fair 

hearing include the MCO . . . as well as the enrollee and his or 

her representative . . . .”38

Second, it is clear from the administrative record that 

Coventry participated in the State fair hearing and was treated 

as a party by the hearing officer. Pursuant to § 84-909, the 

Department has adopted rules and regulations governing the 

appeals process in Medicaid cases.39 Pursuant to these regulations, a Medicaid client may request a State fair hearing 

after denial or limitation of an authorization,40 as Shaffer did 

in this case. The parties to the fair hearing include “the petitioner or person by whom a contested case is brought and the 

Department or other decision maker whose decision is subject 

to appeal or a person or party granted leave to intervene.”41

The “decision . . . subject to appeal” was Coventry’s decision to deny Shaffer’s request for coverage of PDN care to be 

provided by Delores. Coventry appeared at the fair hearing to 

explain and defend its decision. Its representatives presented 

evidence, cross-examined witnesses, entered into stipulations, 

and presented arguments. At the beginning and conclusion 

of the hearing, the hearing officer referred to Shaffer and 

Coventry as the “parties.”

We conclude as a matter of law that Coventry was a “party 

of record” at the State fair hearing and therefore a necessary 

party pursuant to § 84-917(2)(a)(i) in the subsequent appeal to 

the district court. Coventry prevailed at the administrative proceeding, but was not given an opportunity to participate in or 

be heard in the district court appeal that resulted in a reversal 

37 See, Thorson v. Nebraska Dept. of Health & Human Servs., 274 Neb. 322, 

740 N.W.2d 27 (2007); Neb. Rev. Stat. § 68-906 (Cum. Supp. 2014).

38 42 C.F.R. § 438.408(f)(2).

39 465 Neb. Admin. Code, ch. 6 (1995); 482 Neb. Admin. Code, ch. 7 (2010).

40 482 Neb. Admin. Code § 7-003(2).

41 465 Neb. Admin. Code § 6-004.02.
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of the administrative decision. Because the presence of a necessary party is jurisdictional, the failure to make Coventry a 

party to the appeal deprived the district court of jurisdiction. 

In light of this determination, we are required to vacate the 

judgment of the district court and therefore do not address 

Coventry’s third assignment of error.

V. CONCLUSION

For the foregoing reasons, we vacate the order of the district 

court and dismiss the appeal.

Vacated and dismiss

Miller-Lerman, J., not participati